How Does Envelope Budgeting Work?

Envelope budgeting is a process that allows you to keep track of your money more easily. This budgeting process was designed to keep you in touch with exactly what you are spending. Here are the basics of envelope budgeting and how it works. 

Envelope Budgeting System

The basic idea behind the envelope budgeting system is quite simple. You start off by determining how much money you will spend in each area of your life. You will then take a number of envelopes and label them for the different categories of your spending. For example, you could label one groceries, label another one utilities, and label a third envelope entertainment. When you receive your paycheck, you divide it up and place each portion into each envelope. Then as you spend money for each expense, you will remove the money from the envelope. At that point, you have to wait until your next paycheck to replenish each envelope.

Benefits

One of the biggest benefits of the envelope budgeting system is that it is very simple. Anyone can put this plan into place. Also, since you are handling cash, you will be able to tell exactly how much you have left. This prevents you from overspending as well.



When should you use envelope budgeting?



If you have been considering using envelope budgeting, now is as good of a time as any to get started. Envelope budgeting can significantly help you figure out where all of your money is going. With this system, you have to think about spending money every time you make a purchase instead of simply swiping a card. If you do not have the discipline to stick to a planned budget with your debit card, then this technique should be implemented immediately. It will allow you to get control of your financial life and start spending less money overall.

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